F-bar F-up - is accountant bleeding me dry?
 

I moved to the US 3 and a half years ago (on an L1, recently got my green card), and somehow in everything I read about what I needed to do and what I needed to prepare, I missed the bit where I should have been consolidating my UK bank accounts and moving finances to here - I know, I'm an idiot. Then I went with a popular high street chain to do my tax returns and they never asked me about UK accounts, despite knowing I was an immigrant. I know, I'm a massive, massive idiot.

So my situation is that I've never declared interest on my UK savings account and ISAs (not that there's much to report) and I haven't declared that I had these accounts at all (accumulated total is not crazy but definitely over $10k threshold). I learned from a friend recently that I should have been doing this, just spoke to an accountant and they want $8.5k to fix my 1040s for 2018 and 2019, prepare my 2020 return and to bring me back into compliance with the FBar situation. Considering they've already advised me I should expect to pay 5% of my highest UK account balance since I moved, the total is pretty eye watering. I don't have a mortgage, not had a wedding, never had any big holidays or purchases or just generally spent much in any one go ever and I'm being asked to handover what in total (between the accountant and the IRS) feels like a punch in the gut. But enough "woe is me", my questions (if you'd be so gracious) are twofold:

1) Is this a reasonable sum for the preparing of 3 tax returns and all the forms required to bring me into compliance?
2) Is there anything I'm missing here that I should have been doing that is also a potential sting in the tail?

I'm 35 and hoping to one day soon do things like buy a house and start a family, but that's a lot of budgeting and I'm panicked now about the true costs waiting for me here!

Many thanks,
Jack

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Re: F-bar F-up - is accountant bleeding me dry?
 

If your “only” issue is not declaring your foreign accounts and interest, and you were not subject to US taxes prior to 2017 then you can potentially fix this by submitting amended returns for 2017, 2018 and 2019 or whichever of those years apply. If you have to go back to 2016 or before then you have a much different situation. Time is of the essence though because the deadline for a 2017 amended return would normally be April 15 of this year. Because of COVID, the tax deadline for many filings has been extended to May 17th to file the 2020 tax return and to claim refunds for prior years up until 2017 but I don’t know if that also allows you to submit an amended 2017 return for other reasons so I would play safe and get it in before April 15th. Perhaps someone else can advise on that date.

I say you can fix this because refilling the tax returns will bring your taxes into compliance with regard to your foreign income and you can then file FBARs for those years to be fully compliant. Do not miss the FBAR deadline for 2020 which would normally be April 15th this year. I think that has been extended to May 17th because of COVID but I am not 100% sure. Anyway you get an automatic extension to October every year, but you should just file now and get on with it. That form is not hard at all, and you do it online. https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Submitting an amended return can be done independently if you follow the instructions. It is not particularly hard but you do need to follow the instructions on the forms.

The information you provided looks like 2018 is as straightforward as you state, but for 2019 it looks like some other issues are in play as well. I say that because your tax preparer wants to submit Schedule C and extra forms for those years. Can you elaborate on that (or send a private email) and I might be able to help further.

To answer your original question, the charges look very high to me (but perhaps there are other tax issues that would account for that). It also looks like they are forcing you into the voluntary disclosure program which you should be able to avoid if you can get your tax affairs fully corrected via amended returns and that would avoid the 5% penalty. An example is Form 8938, you enter the account number, maximum balance in USD, address, check a couple of other boxes and you are pretty much done. Should take less than 30 minutes even for someone doing it for the first time so charging $350 is extreme in my opinion.

I AM NOT A TAX ADVISOR OR FINANCIAL PROFESSIONAL IN ANYWAY. I am simply someone with a little knowledge and I am willing to help out others when I can.

Re: F-bar F-up - is accountant bleeding me dry?
 

One more thing. If your accounts include foreign mutual funds of any kind, for example UK OEICs, Unit Trusts or Investment Trusts, sell them ASAP and reinvest the proceeds in US funds. It sounds like you aware of the draconian PFIC tax issues surrounding those but just wanted to be sure.

Re: F-bar F-up - is accountant bleeding me dry?
 

Many thanks Glasgow Girl.

The accountant did note that if I had been outside of the US for 330 days in 2017, this would have been much easier, but unfortunately I was in the US for 57 days that year - which I believe is what triggers the 5% penalty? Fortunately I did not file or need to file anything for 2016 or before as I moved in November 2017. Interestingly, the accountant doesn't even think I need to amend the 2017 return. Not sure why 2019 would be different to 2018, that's a good spot. I'll ask.

Incidentally, the accountant now says I'll need to have a "Non-Willful Statement" prepared for about $1,250 as doing it independently is not advised.

I don't have any Trusts or OEICs as you note, it's all standard stuff - a current account, savings account, cash ISA, help-to-buy cash ISA and a personal pension.

I guess the main thing is, is the 5% penalty for voluntary disclosure a better fee than the alternative, which I've advised may be several thousands of dollars per account, per year - which would bankrupt me?

Re: F-bar F-up - is accountant bleeding me dry?
 

I would press him on why you cannot refile 2017 and come into compliance with regard to your foreign income. If you do that for 2017 and subsequent years then you will be fully compliant and should not need to go down the voluntary disclosure route at all. If you were in the US for such a short time In 2017, it is possible that your foreign interest was received before you arrived in the US in which case you would already be complaint for that year. It is also possible that there would be no tax to pay anyway because of your low earnings that year in which case you would again be compliant, so definitely push him on that. But remember time is pressing in on 2017.

Take a look at some of these forms they will be filling in and challenge him on the fees based upon the time required. As I have said many times foreign accounts are a real money maker for tax professionals. They always advise on the voluntary disclosure program which is the least work and risk for them and the most expensive for their client. Then they throw in a good dose of fear mongering to “help” your decision making. Sometimes that is the best route, but in many cases there are alternatives which they don’t offer because those routes are more risk and less lucrative for them.

Like I said filing an amended return is not hard. If all you need to do is to declare some additional interest and your accounts you can likely do it yourself in a couple of hours, including filing Schedule D and Form 8938. Filing the FBARs is also very easy.

Re: F-bar F-up - is accountant bleeding me dry?
 

I'm pretty paralyzed with fear at the moment and can't really think straight. Spoke to another accountant whose fees would be $14k, so significantly more, and still required the 5% penalty (which I understand may be rejected at any point and result in something like $10k-$100k per account, per year, which is just "life over" money).

If I could just resubmit for 2017-2019 and get into compliance without the voluntary disclosure route, why are the accountants not advising this? They don't get the 5% penalty, it goes to the IRS, and I would still pay them significant sums to make this go away. I feel like there's something I'm missing. I don't want to go too far down the route of doing this myself because like you say, I'm running out of time fast here. Wish I could stop feeling sick for a minute and actually think straight. Thanks so much again for your help.

Re: F-bar F-up - is accountant bleeding me dry?
 

Meant to add that there should be no penalty to pay if you come into compliance via amended returns, neither the 5% nor the thousands of dollars per account that he mentions. So, really, really, push him on why he is not going down that route.

If there was no tax due on your foreign accounts for 2017 as I mentioned above that would explain why he does not need to refile 2017, and that is good because it removes some of the time pressures.

Go to the FBAR Link above, crate an account and play around with the form offline. I think you will see how easy it is to file FBARs and save yourself 3 x the $350 he wants to charge. Also, ask why he is not recommending you file a 2017 FBAR. If you do it yourself I would regardless of what he says.

if this is the accountant that got you into this mess, and you do not want to take care of it independently, I would get a second opinion.

Re: F-bar F-up - is accountant bleeding me dry?
 

Thanks. Unfortunately the second opinion I got simply quoted more, and the same 5% voluntary disclosure penalty. Is this because I missed the FBAR deadlines in the previous years, so even if I can go back and amend the 1040s, there's no way to go back and file previous FBARs in time?

The "accountant" that got me into this mess was HR Block's Tax Pro service, which didn't ask me about any of these accounts unfortunately.

Re: F-bar F-up - is accountant bleeding me dry?
 

I have failed to file an FBAR over many years. I have had a somewhat dormant and quite small pension in the UK that I had limited confidence that it would be around (bounced around multiple firms that really didn't want it). I have never taken any distributions and only recently gained online access to the funds. Can I file a mea culpa? I now want to transfer those funds to a SIPP (another challenge) and can I start filing FBAR at that stage? I would guess I need an accountant but dont want to get over charged as I suspect this is not something the average local CPA know much about.

Re: F-bar F-up - is accountant bleeding me dry?
 

Have you read this page https://www.irs.gov/individuals/inte...ion-procedures

If I'm understanding your problem correctly you should be able to file the missed FBARs without penalty.

Re: F-bar F-up - is accountant bleeding me dry?
 

I can't help on the ins and outs of the tax liabilities, but the actual accountant fees seem very high, especially for the additional forms in the more straightforward situations.

https://www.investopedia.com/article...ation-fees.asp

Re: F-bar F-up - is accountant bleeding me dry?
 

I think the problem for the OP (and many others) is that penalties now apply for failing to file Form 8938. You can avoid the penalties if you amend the previous 3 years tax returns to include any income and tax due and provide Form 8938, and back file up to 6 years of FBARs but amongst other qualifying requirements is that you must have been non resident for at least one of those years (less than 330 days in the US) and unfortunately the OP failed that requirement by about 20 days. So while he could file the FBARs after amending his returns, the failure to file Form 8938 makes him subject to those penalties.

Re: F-bar F-up - is accountant bleeding me dry?
 

@TerryGoX. If you were required to file Form 8938 with your tax return because the aggregate value of all foreign accounts exceeds $50K at the end of the tax year, or $75K at any time during the tax year (double those figures if married) then you do have a problem, and even though you have not taken any distributions you will still be subject to the 5% penalty. Potentially a lot more if you do not correct the situation as soon as you are aware of the issue.

However, if your pension is one of the older final salary pensions then it is generally accepted that the value of those pensions is zero until you take distributions. If that is the case then technically you would not be required to file FBARs or Form 8938 if that was your only foreign asset, although personally I would declare it on both forms going forward to be on the safe side.

If it is something else like a private pension, FSAVCs, or anything else that has a specified value then you needed to declare it on FBARs and/ or Form 8938 subject to the specific value thresholds of those forms. You will know if that is the case because you likely received statements annually updating you on the value.

if it is only the FBAR that you failed to file, and there was no distributions, then you should be able to back file the FBAR with no penalties.

Re: F-bar F-up - is accountant bleeding me dry?
 

Jack,

The prices being given to you are excessive. My MIL (she's originally British) did not declare 3+ years of more than $30k in the UK last year. To correct this and submit FBARs was relatively inexpensive - I can't remember exact details but deffo less than $1k in accountant fees. She wrote a letter stating that it was an oversight on her part and no penalty was applied by the IRS.

Good luck
W

Re: F-bar F-up - is accountant bleeding me dry?
 

I've found that dealing with the IRS directly e.g.via phone may be easier in this case to get the clarification you need. They also have the ability to apply leniency to first time errors. Good luck! Let us know how you get on...